Apple Q1 results show why the iPhone doesn’t have LTE—yet (Updated)

Relatively few iPhone users would benefit from an LTE-equipped iPhone when you …

Apple released its iPhone 4S without high-speed LTE capabilities amidst a sea of high-profile LTE Android handsets. While technophiles complained about lack of support for the next-generation wireless standard, there are multiple reasons Apple has so far shied away from the technology. Poor battery life and lack of a suitable baseband processor to fit the iPhone's form factor are two reasons that have been cited by Apple in the past. But the company's most recent financial results offer another clear reason: the majority of iPhones sold today are in areas without 4G networks of any kind.

The US has one of the only significant LTE rollouts in the world. A few major cities in Canada, Sweden, and Saudi Arabia account for most of the rest of the global LTE network availability. Nearly all of Europe, Asia, South America, Africa, and Australia lack any LTE service outside of tiny test markets.

After looking at Apple's results for its fiscal first quarter of 2012, there's no question that the iPhone continues to be a success. The company sold a record 37 million handsets—as much as the two previous quarters combined, including the record 20 million sold in fiscal third quarter 2011. A large majority of those iPhones were sold outside the US.

Comparing Apple's revenue sources for the past two years, you can see that the iPhone is critical to Apple's bottom line.

Data: Apple financial results

Who would an LTE iPhone benefit?

According to fourth quarter 2011 results, AT&T activated 4.1 million iPhones, while Verizon activated 4.2 million. Sprint would not disclose the number of iPhones it activated last quarter, but we feel safe in assuming that number is less than 4 million. Assuming Sprint was able to activate (perhaps a generous) 2 million or so iPhones, only a little over a quarter of iPhones were sold in the US. The other three-quarters, then, are sold in areas with practically no LTE coverage.

(Editor's note/update 1/26/2012: The numbers used in the previous paragraph for AT&T's activations is incorrect, as they are from 2010. The fourth quarter 2011 numbers from AT&T show 7.6 million iPhone activations. Those numbers were released after this report was published, but they are relevant to the calculations in this article. With the new numbers, that means roughly 37 percent of iPhones sold last quarter were inside the US.)

Considering the US market alone, only Verizon has LTE service available to most of its customers. AT&T very recently turned on its first round of LTE towers in a few major US cities, though it will be well to the end of 2012 before its LTE network closes in on Verizon's. Sprint has a large 4G WiMAX footprint, but that is incompatible with the technology behind LTE. The company announced earlier this month that it would begin rolling out LTE in limited markets by the first half of 2012.

Since roughly less than half of US iPhone users would even have the chance of getting LTE reception, at most 15 percent or less of iPhone users globally could take advantage of 4G speeds. Though Apple has been known to occasionally make separate devices for different markets—for instance, you could get an iPhone 3GS without WiFi in China, or an iPhone 4S without a camera in Singapore—the company generally prefers to stick to a single device configuration whenever possible. So far, it just hasn't been practical to include LTE hardware in the iPhone when only a small fraction of users could benefit from it.

LTE iPhone sooner than later

Still, that doesn't mean other factors won't come into play that could bring LTE to the iPhone later this year or early next year. Qualcomm, Apple's current baseband supplier of choice, has new versions of chips with integrated LTE support coming this year. Similar in design to the chips currently in use in the iPhone 4S and iPad 2, the MDM9615 supports LTE category 3, HSPA+, and EV-DO rev B high-speed wireless networks. It's also manufactured on a 28nm process, offering significant size and power consumption advantages over existing single or multi-chip solutions.

The MDM9615 is supposed to be available in quantity to OEMs in this first quarter of 2012, so it's possible that chip could make it into a next-generation iPad expected around March or April, as well as a next-generation iPhone likely targeted for late summer or early fall.

Since the US will still be the only major LTE market throughout 2012, Apple might rely on one of two other possible strategies for LTE adoption. It may make iPhones using the newer Qualcomm chip specifically for the US and perhaps some of the few other LTE markets later this year. iPhones for the rest of the world may still use a chip that only includes compatibility with HSPA+ and EV-DO networks.

Alternately, Apple may hold out for greater LTE adoption among its carrier partners. This is similar to the situation with the original iPhone—that device launched with support for relatively slow 2G EDGE networks in 2007 instead of the faster, 3G UMTS networks more popular outside the US. As the iPhone became available globally, Apple added support for the faster standard in the iPhone 3G one year later. In this scenario, Apple may wait for a third-generation MDM9x25 series baseband chips from Qualcomm slated for 2013.

Though LTE has been seen as a competitive advantage for Android-based smartphones, the iPhone's lack of LTE compatibility clearly hasn't slowed down its brisk sales clip. Apple CEO Tim Cook claimed during Apple's quarterly analyst call on Tuesday that the company could have sold even more iPhones if it could keep up with demand. However, Apple won't be able to ignore LTE forever, particularly in the US. Where exactly the tipping point lies is uncertain, but we're betting on sooner rather than later.

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79 Reader Comments

I can totally see Apple waiting until more LTE is available. Windows Phone and Android can fill in LTE for time being. Even though I live in an LTE city, I don't feel the need for faster speeds, but that is also due to my low (500MB) cellular data limit.

AT&T can't do 3G properly with lots of missing coverage in N. California towns and cities. I'm not expecting them to do LTE or 4G better. I'd rather Apple focused on better battery life, with perhaps a larger battery/iPhone case.

The one glaring omission as to predicting the future of the iPhone 5 is that the Qualcomm MDM9615 also supports TD-SCDMA, which is the network technology used by China UnicomChina Mobile and its over 600M subscribers.

Six. Hundred. Million. Subscribers.

Disclaimer: I'm long on AAPL and QCOM for obvious reasons.

Edit: raz3000 pointed out its China Mobile that has 600M subscribers, not China Unicom. Sorry!

Mmm, sounds like that chipset would also enable a T-Mobile iPhone. I wouldn't be *too* surprised to see Apple include that chipset without enabling the LTE functionality initially (if for example the LTE power consumption issues aren't addressed adequately).

The one glaring omission as to predicting the future of the iPhone 5 is that the Qualcomm MDM9615 also supports TD-SCDMA, which is the network technology used by China Unicom and its over 600M subscribers.

Six. Hundred. Million. Subscribers.

Disclaimer: I'm long on AAPL and QCOM for obvious reasons.

Yep. Anyone that thinks Apple can't possibly continue growing isn't paying attention. 2012 Q1 results could still just be the tip of the iceberg.

Mmm, sounds like that chipset would also enable a T-Mobile iPhone. I wouldn't be *too* surprised to see Apple include that chipset without enabling the LTE functionality initially (if for example the LTE power consumption issues aren't addressed adequately).

I don't think that's necessarily true. Although it will support the standard used by T-mobile, iirc T-mobile uses a very unusual frequency in the US called AWS (I think it stands for advanced wireless spectrum). Because if this it not only needs the right baseband, but it usually needs separate and special antennas for its frequencies.

I don't really see the point of LTE on a phone, though. HSPA is fast enough for pretty much anything you may want to do on the phone itself.

While more speed is always a good thing, for the moment, I more or less agree with you. The limiting factor in phones today seems to be local compute resources rather than raw network bandwidth. Maybe if I took a train to work and watched Netflix or Hulu the whole way, I'd like the extra bandwidth, but for now, my Thunderbolt's fancy LTE isn't worth much, IMO.

People who tether their phones for laptops, though, it a completely different matter.

I don't really see the point of LTE on a phone, though. HSPA is fast enough for pretty much anything you may want to do on the phone itself.

I generally agree. Download speeds are pretty damn fast on a 3G network... once they get going.

And that's the big advantage of LTE in my mind. Lower latency means those web pages start loading right away, rather than taking a couple seconds to connect first. This also has big implications for functions like online gaming.

maybe it just shows how little interest people have in LTE if even a tech related site's users aren't bothered with keeping up on the acronym's meaning.

It's just him. Anyway it's marketed as 4G and not LTE. Over half of Verizon's non iphone customers picked 4G handsets. All normal people hear from the sales guy is it's faster. Then they go home with a 5 hour battery life and hate the phone.

Also agree with the comment that HSPA+ is really fast for most phone uses. LTE latency is significantly better but for web & apps it should be a small fraction of the load+rendering time. NBD.

Verizon has announced that they will no longer allow non-LTE smartphones onto their network, with the small exception of Push-To-Talk phones that aren't yet supported on LTE. There's no way they would have said this if the next iPhone weren't going to have LTE.

The one glaring omission as to predicting the future of the iPhone 5 is that the Qualcomm MDM9615 also supports TD-SCDMA, which is the network technology used by China Unicom and its over 600M subscribers.

Six. Hundred. Million. Subscribers.

Disclaimer: I'm long on AAPL and QCOM for obvious reasons.

It is China Mobile, the world's largest mobile carrier, that has the dominant subscriber base in China. China Unicom, which has 150 million or so subscribers, uses GSM and their 3G network is already compatible with the current iPhones. China Unicom is the only carrier officially supported by Apple, but of course Apple wants access to China Mobile's much larger subscriber base. One reason China Mobile is accelerating the deployment of 4G ahead of competitors is because their proprietary LTE standard, TD-LTE, will be compatible with the first 4G iPhone from day one.

Incidentally, the iPhone is so popular in China that over 10 million China Mobile subscribers use it even though they can't use 3G on that network. They primarily use Wifi instead, which is widespread especially in urban areas.

I don't place much value in higher browsing speeds. I didn't check for 4G speed when I bought my last phone, and probably won't when I buy the next one, either. I'm not doing torrents with it, not even heavy browsing, so I don't care. I'll take battery life, good screen, good sound, and a bunch of other things, over 4G

The one glaring omission as to predicting the future of the iPhone 5 is that the Qualcomm MDM9615 also supports TD-SCDMA, which is the network technology used by China Unicom and its over 600M subscribers.

Six. Hundred. Million. Subscribers.

Disclaimer: I'm long on AAPL and QCOM for obvious reasons.

It is China Mobile, the world's largest mobile carrier, that has the dominant subscriber base in China. China Unicom, which has 150 million or so subscribers, uses GSM and their 3G network is already compatible with the current iPhones. China Unicom is the only carrier officially supported by Apple, but of course Apple wants access to China Mobile's much larger subscriber base. One reason China Mobile is accelerating the deployment of 4G ahead of competitors is because their proprietary LTE standard, TD-LTE, will be compatible with the first 4G iPhone from day one.

Incidentally, the iPhone is so popular in China that over 10 million China Mobile subscribers use it even though they can't use 3G on that network. They primarily use Wifi instead, which is widespread especially in urban areas.

Those iPhones that were "discarded" from people who upgraded have to go somewhere.

My iPhone 4 supports 7.2 Mbps HSDPA and I've seen it do a 5.8 Mbps speed test. I believe the 4S one does 14.4 and there are networks that already support 28.8. So HSPA provides more than enough raw bandwidth for video streaming; remember that this is per user bandwidth, not something shared among all users. Of course video on a mobile device is going to suck because the quality of the connection goes up and down as you move around and it would be expensive to build out the networks such that there is enough bandwidth for video everywhere.

As for computers: why route the connection through a phone, just put a USB LTE adapter in the computer and enjoy the benefits of a much larger battery.

Kind of off-topic, but with the number of new consumers added in China and around the globe every month, recycling programs for electronics should be mandatory in all countries.

Also, HSPA+ 42 has the same speed and spectral efficiency as the category of LTE that Verizon uses.

It's a shame Steve Jobs couldn't hang around long enough to see this. With Apple TV around the corner this may only be the beginning. Maybe we'll soon see the first public company to eclipse a $1 trillion market cap.

Last point: Apple seems to dislike releasing territory-unique iPhones. They want one solution for all people. So it's likely LTE will be integrated in all iPhones. Also the iPhone 4G is supposed to have been Steve Jobs's final project.

I don't really see the point of LTE on a phone, though. HSPA is fast enough for pretty much anything you may want to do on the phone itself.

The one huge advantage is significantly more efficient use of spectrum. Because LTE can move the voice communications onto the IP side it gives you ~20-30% more efficient use of spectrum than either GSM+HSPA or CDMA+EVDO. This of course is ignoring the fact that the standards committees have basically stalled on standardized LTE voice implementations, this may be what Apple is really waiting for as it will help their carrier partners significantly. I'm not up on the industry enough to know what parts of the VoLTE are actually standardized, and what parts of the standard have started to make it into actually orderable equipment, but with data usage exploding and spectrum not readily available I have to believe that the carriers are going to be desperate to move to it in order to capture that potential profit in markets with maxed out spectrum.